The Impact of Trade on Aggregate Productivity and Welfare with Heterogeneous Firms and Business Cycle Uncertainty PDF Download
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Author:
Publisher:
ISBN: 9780853282907
Category : Business cycles
Languages : en
Pages : 39
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Book Description
This paper presents a model with monopolistic competition, productively heterogeneous firms, and business cycle aggregate shocks. With firm-specific productive heterogeneity, weaker firms quit when faced with a negative aggregate shock. Consequently, trade does not always increase firm-level aggregate productivity as negative shocks on the home market can be compensated for by positive shocks elsewhere. Weaker firms, which would otherwise quit in autarky, can continue to operate by exporting. Despite this, trade can still improve welfare for risk-averse consumers by reducing aggregate price fluctuations.
Author:
Publisher:
ISBN: 9780853282907
Category : Business cycles
Languages : en
Pages : 39
Get Book Here
Book Description
This paper presents a model with monopolistic competition, productively heterogeneous firms, and business cycle aggregate shocks. With firm-specific productive heterogeneity, weaker firms quit when faced with a negative aggregate shock. Consequently, trade does not always increase firm-level aggregate productivity as negative shocks on the home market can be compensated for by positive shocks elsewhere. Weaker firms, which would otherwise quit in autarky, can continue to operate by exporting. Despite this, trade can still improve welfare for risk-averse consumers by reducing aggregate price fluctuations.
Author: Andrew B. Bernard
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines how country, industry and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The relative ascendance of high-productivity firms within industries boosts aggregate productivity and drives down consumer prices. In contrast with the neoclassical model, these price declines dampen and can even reverse the real wage losses of scarce factors as countries liberalize.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Marc J. Melitz
Publisher:
ISBN:
Category : Commercial policy
Languages : en
Pages : 44
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Book Description
We develop a monopolistically competitive model of trade with firm heterogeneity - in terms of productivity differences - and endogenous differences in the 'toughness' of competition across markets - in terms of the number and average productivity of competing firms. We analyze how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average markups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower markups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modeling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous markups.
Author: Dennis Becker
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
The informal sector is often seen as a coping mechanism for firms that choose to evade registration fees or pay low wages. In this paper, I investigate the role of the informal sector in the impact of trade liberalization on welfare, employment and wage inequality in a model of trade with heterogeneous firms. The findings suggest that trade liberalization reduces informal employment unambiguously. Contrary to the extant literature, however, its impact on welfare, total employment and wage inequality is country-specific.
Author: Lorenzo Caliendo
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 56
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Book Description
A firm's productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other firms' outcomes. We use the theory to analyze the impact of international trade on organization and calibrate the model to the U.S. economy. Our results indicate that, as a result of a bilateral trade liberalization, firms that export will increase the number of layers of management and will decentralize decisions. The new organization of the average exporter results in higher productivity, although the responses of productivity are heterogeneous across these firms. In contrast, non-exporters reduce their number of layers, decentralization, and, on average, their productivity. The marginal exporter increases its productivity by about 1% and its revenue productivity by about 1.8%.
Author: Rodrigo Adão
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, firm heterogeneity amplifies both the gains from trade in countries with more exporter firms and the welfare gains of European market integration in 2003-2012.
Author: Edward J. Balistreri
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Ngo Van Long
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Ms.Valerie Cerra
Publisher: International Monetary Fund
ISBN: 1513536990
Category : Business & Economics
Languages : en
Pages : 50
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Book Description
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
